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Good News From The Oil Patch And South Africa

Today we have a reporting company and good news from South Africa and, via Washington, DC, for the Dutch Antilles and more.

Tech & Tel

South African Naspers reported core headline FY 2017-8 earnings up 72% at $2.5 billion on revenues up 38% to $20.1 billion. EPS came to $5.81/sh vs prior year's $3.37/sh. NPSNY is a 31% owner of Tencent of Hong Kong which has only a gray market ADR, TCEHY. Core headline earnings excludes one-offs like the sale of about 2% of NPSNY last FY as well as other non-operational gains. The net and media company's shares are up another 3% today after rising 8% yesterday in UK trading.

Here is more color from the company's press release: Fiscal-year revenues on economic interest basis were up 38%, to $20.1 billion while Internet revenues which account for 80% of the total were up by 50% to $15.9 billion. It declared a final dividend per share of $6.50. Trading profits also increased 50% (56%), fueled by e-commerce and Tencent’s strong results. Classifieds, business-to-consumer payments, and food delivery contributed to an acceleration in e-commerce revenue growth by 25% while increased scale trimmed the e-commerce segment’s trading losses by 8% to $673 million and resulted in a considerable improvement in trading margins.

Classifieds (excluding letgo) turned profitable and cash generative during the year. The contribution from profitable e-commerce businesses, for the first time, now matches video entertainment where it faces international competition. However video entertainment sale nonetheless rose 8% to $3/7 billion thanks to direct-to-home also up by 1 million subscribers plus a half million new digital terrestrial TV subscribers. The total households it reaches in Africa despite weak economies if 13.5 million.

During FY 17-8. NPSNY strengthened its position in online food delivery by investing a combined $1.4 bn in Delivery Hero and Swiggy. Moreover, NPSNY got from its payments business into broader fintech services by investing in Kreditech, a credit-scoring business, and Remitly, a technology-driven remittance business, for a combined $199 million. Equity-accounted investments contributed US$3 billion to core headline earnings, an increase of 45% year on year. Consolidated free cash outflow was $242 million, with working capital movements, notably video entertainment prepaid content rights renewals hitting hardest – having a significant impact.

Following the disposal of Tencent shares, Naspers held net cash of $8.2 billion at year-end to fund future opportunities. “In the year ahead, we will use our strong balance sheet to accelerate the growth of our classifieds, food delivery, and fintech businesses globally. Also to pursue other growth opportunities when they arise,” said Naspers CEO Bob van Dijk. “We will continue to scale the e-commerce and sub-Saharan Africa video entertainment businesses and drive them closer to profitability. We will also focus on ithe area of machine learning,” he added.

Tencent itself meanwhile is backing the Hong Kong IPO of a travel agency, Tongchen Yilong, which is aiming to raise RMB 22.3 billion. TCEHY must put its funds into any pot on offer in the Chinese market because of the tough competition from other internets with a broader listing. The performance of NPSNY was not about its selling down its TCEHY position a bit, but about how the China business still has an enormous impact. TCEHY is easier to track from the USA and more liquid, but also is ahead of itself price-wise, a FAANG from Hong Kong.

Vivian Lewis is editor and founder of Global-Investing.com, the daily blog newsletter for Americans and others seeking to internationalize their portfolios. She brings unique experience and ...
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Vivian Lewis is editor and founder of Global-Investing.com, the daily blog newsletter for Americans and others seeking to internationalize their portfolios. She brings unique experience and competence to the business of picking foreign stocks.

After graduating from Harvard magna cum laude (and being elected to Phi Beta Kappa), Vivian lived 18 years in Europe where she worked as a financial journalist. Back in the U.S. in 1989, she decided that retail investors managing their own portfolios deserved the kind of information she had been digging up for mutual fund and pension fund managers. So she started Global Investing and later GlobalInvestingPro.

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